Globalization and welfare spending across 21 transitional economies

Abstract

This article explores the impact of globalization on welfare spending in transitional states. Based on World Bank and International Monetary Fund (IMF) cross-country data sets 1990–2005, I test two leading hypotheses: the first of which predicts a negative relationship between global-economic embeddedness and welfare spending, and the second of which predicts a positive relationship between democratization and welfare spending. Using a cross-section time-series analysis, my findings suggest that the experiences of the transitional economies do not confirm either hypothesis. During the 16-year period of analysis, established globalization factors showed conflicting influence on welfare state arrangements. In addition, my analyses demonstrate a positive correlation between the use of IMF credit and welfare spending in transitional states. This finding contradicts the structural adjustment literature, which largely views policy-based conditional lending as a negative influence on receiving countries’ welfare expenditures.